BitGo, a United States cryptocurrency custodian, has launched a regulated platform designed to custody and manage native tokens for Web3 protocols, according to a statement from BitGo shared with Cointelegraph on Sept. 16.
The custody platform enables crypto-native organizations such as foundations and protocols to programmatically manage native tokens for distribution to investors, employees, grant recipients, and other stakeholders, BitGo said.
Regulated digital asset custodians are gaining traction in the US among investment managers and fund issuers but Web3 protocols generally still self-custody tokens in on-chain wallets or smart contracts.
BitGo insures crypto against some instances of loss or theft. Source: BitGo
Related: Fireblocks granted New York charter for crypto custody
By “cobbling together a non-custody wallet solution, a smart contract for distribution, and yet another provider for custody” Web3 protocols introduce “unnecessary pain and complexity, with gaps in security, compliance, and transparency,” BitGo said.
BitGo’s token management platform aims to handle everything from “token vesting, unlocking, and distribution” to “staking… liquidity management, and even tax reporting,” it said.
Self-custody minimizes dependence on centralized intermediaries but introduces its own risks, including cybersecurity exploits and internal misconduct.
On Sept. 16, decentralized finance (DeFi) protocol Delta Prime was hacked for at least $6 million worth of virtual assets. Meanwhile, BaseBros Fi, a DeFi protocol on Base blockchain, disappeared after stealing user funds via an unaudited smart contract.
Crypto in BitGo’s custody is insured up to $250 million “against loss, theft, and misuse in situations where we hold all keys,” according to its website. Cybersecurity insurance is standard among regulated US crypto custodians.
New York-regulated virtual currency businesses. Source: NYDFS
On Aug. 14, Cointelegraph reported that Fireblocks, best known for its self-custody solutions, obtained a charter to act as a regulated crypto custodian for US clients.
The US Securities and Exchange Commission (SEC) has been cracking down on crypto investment managers who fail to adhere to rules requiring client funds to be held by qualified custodians, such as a registered broker-dealer or bank.
Through BitGo New York Trust Company, BitGo is among several US firms — including Coinbase Custody Trust, Fidelity Digital Asset Services, and Paxos Trust Company — chartered by the state of New York to custody crypto for US clients.